European shares boosted by earnings, miners

SarahTurner

LONDON (MarketWatch) -- European shares advanced Wednesday as investors bought into the mining sector and pushed up shares in Societe Generale, Bank of Ireland, Adidas and Marks & Spencer in the wake of forecast-beating results.

The pan-European Dow Jones Stoxx 600 index (SXXP) rose 1.8% to close at 239.13, as miners advanced strongly after gold futures surged to a record and other metal futures also gained ground.

A weak dollar and India's recent purchase of bullion continued to whet investors' appetite for the precious metal and shares of Kazakhmys (KAZ) jumped 7% and shares of Fresnillo (FRES) rose 8.9%. Read more on gold.

On a regional basis, the German DAX index (1876534) rose 1.7% to settle at 5,444.23, the French CAC-40 index (PX1) gained 2.4% to end at 3,670.33 and the U.K. FTSE 100 index (UKX) climbed 1.4% to finish at 5,107.89.

Asian shares had a stronger session and U.S. stocks got off to a positive start after ADP data showed that private-sector firms in the U.S. cut 203,000 jobs in October, the fewest jobs lost since July 2008. See full story.

"I think that today there's a wait-and-see attitude before the Fed and also a technical pullback against the correction we have seen in the last few weeks," said Philippe Gijsels, strategist at Fortis Bank.

The U.S. Federal Reserve is not expected to announce a change to its key rate on Wednesday but investors will be looking for signs of when monetary policy will change.

"Central banks will have to walk a very difficult line. On one hand, they have to convince the markets they are serious about fighting inflation. On the other hand, they don't want to spook markets by indicating that they will withdraw liquidity too fast," said Gijsels.

"Markets are trying to figure this out," he said, noting recent volatility for shares.

The Stoxx 600 index ended down 1.2% on Tuesday, with banks and autos notably lower after Swiss bank UBS posted a loss and German auto maker BMW's profit fell sharply.

But results from Societe Generale (GLE), which gained 4.6%, helped the banking sector on Wednesday. The French bank said that its third-quarter profit more than doubled as further improvement in market conditions boosted earnings. The result was comfortably above the company-provided consensus forecast of 350 million euros.

Also, Bank of Ireland (BIR) shares, which have been extremely volatile during the financial crisis, shot up 24.6%. The lender reported a sharp rise in charges to cover bad loans, which led to a 73% drop in its fiscal first-half net profit to 168 million euros.

It reported an underlying loss of 979 million euros. Still, given the weak state of the Irish economy, Davy Stockbrokers analyst Emer Lang said they'd been expecting even higher loan losses and the underlying loss was therefore better than the 1.08 billion euros Davy had been expecting. See full story.

Autos also retook some lost ground. Renault (RNO) shares rose 4.1% after Japanese auto maker Nissan, in which Renault holds a 44% stake, said that its first-half profit dived 92.9% but raised its outlook.

"Renault plays on Nissan's U.S. recovery," said analysts at Bank of America's Merrill Lynch unit. "Autos remain too cheap, especially after the sell-off," they added.

"Volkswagen plays on emerging-market growth. Daimler is the best play on Mercedes and truck recovery," they said.

Both firms reported U.S. sales late Wednesday, with Volkswagen unit sales up 7.2% at 17,037 and Daimler's Mercedes-Benz unit reporting that U.S. sales jumped 21.3% to 18,193 vehicles.

Earnings from other sectors also provided a boost, Shares of sportswear maker Adidas (ADS) rose 3.8% after it reported that third-quarter net income attributable to shareholders fell 30% to 213 million euros ($313.5 million), but beat analyst expectations. The firm stuck to its 2009 outlook. See full story.

Nobel Biocare (NOBN) shares jumped 6.9%.

The dental-implants maker said that its third-quarter net profit more than doubled to 33.6 million euros, from 13.50 million euros last year, well above analyst forecasts for a 15.72 million euro profit.

In the U.K. retail sector, shares of Marks & Spencer (MKS) climbed 6%. Its fiscal first-half adjusted pre-tax profit rose to 298.3 million pounds from 297.8 million pounds, beating analyst forecasts, after the firm increased its clothing market share and improving performance at its food operations. See London Markets.

Air France-KLM (AF) shares rose 4.4% after it was upgraded to neutral from sell at UBS. British Airways (BAY), gained 6.6% after it was upgraded to buy from neutral by the broker.

The broker said that, since recent highs, British Airways shares have fallen by 37% and Air France-KLM shares have fallen by 27%.

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